BA chief: English holidaymakers will flock to independent Scotland to avoid flight tax

Willie Walsh says travellers will head for Scotland if it abolishes air
passenger duty

An independent Scotland could see English holidaymakers rethinking their travel plans and heading north of the border to dodge flight taxes, said the boss of British Airways.

Willie Walsh, chief executive of BA parent International Airlines Group, said that if Scotland breaks away from the union he expects to see passengers favouring flying from airports in a newly independent nation to avoid Air Passenger Duty (APD) charged by the Westminster government.

“Absolutely without question it will happen,” he said, dismissing claims that APD represents only a fraction of a flight’s cost. “It is that much money to avoid that it is a factor. Anyone who thinks otherwise is a fool.

“An independent Scottish government has made clear they would abolish APD because they see it as damaging to the economy and that is exactly what we will see – a million people drive to Dublin from Northern Ireland every year to avoid APD.”

Depending on which class passengers fly, APD is levied at between £13 and £52 on flights of up to 2,000 miles. For the longest flights – 6,000 miles or more – it ranges from £94 to £376. For example, a family of four flying economy to the New York could expect to pay £268 in APD.

Should Scotland become independent Mr Walsh believes airports in the north of England such as Newcastle would suffer as passengers head north but said BA would be unlikely to shake up its flag-carrying services to capitalise on this.

“We would look at it but [flights from Scotland] are a small part of the business,” he said, though he added that IAG’s recently acquired low-cost carrier Vueling could move in to take advantage.

He made the comments on Friday alongside full-year results at IAG showing a return to profits. Pre-tax profits from continuing operations, after exceptional items, rose to €227m (£186m) from a €774m loss last year. Total revenue grew 3.1pc to €18.6bn, despite a near 12pc slump in cargo revenue. Passenger revenue grew almost 6pc to €16.2bn.

The profit was the result of reduced losses at its Spanish airline, Iberia, and the acquisition of profitable budget carrier, Vueling. Mr Walsh said BA has also benefited from cost improvements and the additional Heathrow take-off and landing slots it acquired through its 2012 takeover of the loss-making UK carrier, BMI.

British Airways made an operating profit of €762m for the 12 months to December 31. Iberia, while remaining in the red, reduced its losses to €166m. Vueling has made a €168m operating profit since April, which it was bought by IAG.

The company said it expects to make "steady progress" this year towards its target of generating a group operating profit of €1.8bn by the end of 2015. At an operating level, IAG made a profit of €770m for 2013, before exceptional items.

IAG has reduced Iberia's fleet by 23 aircraft and cut capacity by 14pc as part of a painful restructuring to stem the Spanish airline's losses. The overhaul, which triggered strikes and political outcry in Madrid, also saw IAG cut 3,141 jobs at Iberia.

Mr Walsh said a report published before Christmas by the government-backed Airports Commission, which is investigating where to build a new runway in the South East of England, was "excellent" but he reiterated his opinion that politicians are likely to thwart any progress towards improving the UK's airport capacity problems. The last full-length runway in the South East of England was opened in 1946.

Two options for expansion at Heathrow were short-listed by the Airports Commission, plus a second runway at Gatwick.

"I think the [Davies] report is excellent, the commission has done some really good work. The problem is political, the failure to embrace the findings of the report. I don’t see any sign that politicians have changed their view," said Mr Walsh.

"I think the politicians will try to avoid this issue and they’ll be sitting here in several years debating this issue and we’ll be losing ground. The economy will suffer as a result of lack of runway capacity in general," he added.